Law Revisions Improve Tax Breaks for Forest Management

On its face, the Qualified Forest Program (QFP) tax exemption makes sense. It allows the owner of forested property between 20 and 640 contiguous acres to receive a tax break for managing the forest. Enrolled property owners are exempt from tax levied by a local school district for school operating purposes (typically up to 18 mills, minus a 2 mill fee to participate), in exchange for having a forest management plan. This program is also a benefit if you are selling the property or leaving it to family members: the taxable value remains capped (avoiding the “pop up tax”) if the land remains in the QFP after the transfer.

Encouraging forest management is designed to not only boost Michigan’s sagging forest product industry, but it also has the benefit of improving habitat for wildlife. Private, non-industrial landowners hold about 60 percent of Michigan’s timber supply, or 11 million acres of forested lands, yet less than 20 percent of these lands are actually managed. MUCC supports incentives to encourage these landowners to actively manage their forest.

Actively managed forests are healthy forests— they create quality wildlife habitat to produce more game species to benefit hunters and trappers, and help naturally filter water runoff and prevent erosion which helps our sportfishing and water quality. Management makes the whole forest more resilient and resistant to forest health threats. These management activities will also contribute to a healthier state and regional economy, where the forest product industry contributes $14 billion and hunters, anglers, and trappers spend nearly $4.88 billion each year pursuing their recreation in Michigan

On June 6, 2013, Governor Snyder signed into law Public Act 42 of 2013. PA 42 (in addition to eight other Public Acts) changed the manner in which the QFP is administered and moved the program jurisdiction from the Michigan Department of Natural Resources (DNR) to the Michigan Department of Agriculture and Rural Development (MDARD) and increase the role of conservation districts (to provide education and outreach on the QFP) and “qualified foresters”—forest resource professionals, registered with the MDARD, that are knowledgeable in forest management practices and qualified to write forest plans.

These legislative changes address issues seen as barriers to good forest management and come after nearly 5 years of discussions among forestry, conservation, and agricultural groups and legislators. MUCC thanks the lead sponsors for their leadership in bringing forward this important issue into the legislative arena: the Senate package, Sen. Darwin Booher (R -Evart), along with Sen. Thomas Casperson (R – Escanaba), Sen. Michael Green (R-Mayville), Sen. Arlan Meekhof (R-Olive Twp), and Sen. John Moolenaar (R-Midland) and the House Bill sponsors include Representatives Frank Foster (H.B. 4069), Ed McBroom (H.B. 4243), and Bruce Rendon (H.B. 4244).

In terms of improvements to the program, the new QFP rules now allow existing and newly built structures on qualifying property, though the structure and the land beneath it are not eligible for the tax exemption. Previously, even a small pole barn would disqualify a parcel, regardless of the size and the quality of the forested lands around it. The new QFP program also has changed the withdrawal penalty, which previously caused many landowners to simply steer clear of the program. Now, a landowner would only have to repay 7 years-worth of the benefit received (the 16 mills times 7), or if no harvest has occurred, the repayment would be doubled.

The program currently has approximately 70,000 acres enrolled, out of about 11 million potentially eligible acres of private forestlands in Michigan. The cap in the existing law is set at 1.2 million acres, so we still have significant room for enrollment.

Some changes were also made to the Commercial Forest Act (CFA) program (Public Act 48 of 2013), which would allow CFA enrollees to transfer to QFP during a year of transition without penalty, but this requires quick action. This legislation would also allow the DNR to require withdrawal of commercial forestland from the program if an owner took action that denied or inhibited access to the commercial forest for public hunting and fishing, unless the owner corrected the action and allowed access. The QFP does not require open public access like the CFA, but it also does not have as great of a tax benefit to property owners. While MUCC hopes that large CFA landowners remain in the CFA program to provide hunters, trappers, and anglers access to lands, especially throughout the Upper Peninsula, this change will hopefully reduce the number of small acreage CFA landowners that were not properly allowing access and ensure those getting significant tax breaks are playing by the rules.

September 1, 2013 is the deadline for new QFP applications if they hope to get the tax incentive for 2014. CFA applications have the same September 1, 2013 deadline to receive the tax incentive in 2014. Existing QFP enrollees will have to fill out paperwork to renew their interest in the new QFP by November 30, 2013 without needing to pay an application fee.

Conservation district staff can provide assistance with applications and can direct property owners towards qualified foresters in your area to develop a forest management plan. Visit macd.org for local district contact information or check out these links to additional online resources: